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The publication of the OECD Model tax treaty in 1977 marked 50 years of development. The Model seeks to remove international tax barriers by reconciliation at the interface of tax systems and has produced a bilateral network because it is generally considered that the diversity of tax systems around the world means that it is not possible to have a general multilateral treaty. Despite its success, the Model is plagued by problems, particularly those arising from the taxation of transnational corporations and corporate groups. The major issue is whether separate taxation or consolidated group taxation should be applied to the members of a corporate group across national boundaries. The Model adopts separate taxation while the international tax system moves directly and indirectly towards consolidation. The result is that the Model is increasingly inefficient as it creates biases in taxpayers’ economic behaviour. The schedular structure of tax treaties with different tax regimes applied to different types of income encourages taxpayers to recharacterise income to obtain the best tax result. The problem is made worse by the requirement of reciprocity in tax treaties even where the tax systems of the treaty partners are quite different and effective reciprocity is not achieved by formal reciprocity. These difficulties are most acute in the corporate group and similarly the practice of treaty shopping through the use of conduit corporations is caused by the separate taxation of the members of a group. International tax problems are also arising outside the OECD Model, that is, the Model fails to deal directly with or is inappropriate for them as the issues were not significant when the Model originated. The practice of thin capitalisation and the use of tax havens have produced legislative responses that adopt consolidation tax methods and contradict the basic structure of tax treaties. Yet the Model has little or nothing to say directly on these matters and may even be an impediment to desirable development of national tax laws. Failure to adapt the Model means that countries are explicitly or implicitly changing their domestic tax laws in ways that conflict with their tax treaty obligations. Failure to develop responses to emerging issues is largely to be explained by the converse relationship between the growth of and change to the bilateral tax treaty network – the larger the network the more difficult it is to change because of the increasing number of treaties that need to be renegotiated. Hence the OECD is resorting to change by reinterpretation but this has only marginal effects and leads to tortuous linguistic gymnastics. Judged from a trade perspective the network seems larger than is necessary. Moreover, individual nations, especially smaller ones, find their treaty policy choices restricted in negotiations by most favoured nation status protocols so that it is often not possible to produce the best solution in a particular bilateral negotiation. By contrast the US regularly breaches its treaties in pursuit of its policy goals. The search for alternatives to the current bilateral network usually leads to suggestions for multilateral treaties, but as the diversity of tax systems that is the cause of bilateralism has not been directly addressed by the OECD Model, it is not possible for the bilateral network simply to evolve into a multilateral treaty. Such multilateral treaties as exist are regional and involve countries with similar economic and cultural backgrounds so that the necessary degree of uniformity is already present. Since the rest of the world remains in bilateral mode the multilateral treaties are likely to mimic the OECD Model and hence not address its problems. It seems likely that the OECD may soon achieve success with a worldwide multilateral treaty network in the administrative assistance area but again this can be explained by the requisite degree of uniformity of tax administration laws and international problems. Hence the desire for a multilateral treaty often expressed by the drafters of model treaties can be regarded as a call for more uniformity in tax systems. Such uniformity may be possible in the context of trade blocs which reconnect tax to trade issues. The European Community has despite many difficulties and setbacks made considerable progress in this area but more with sales taxes rather than the income tax which is the major concern of tax treaties. The existing bilateral network may be one reason why the income tax has not been given as much attention in Europe. One problem of regional moves to uniformity is that they may operate as barriers to rather than promoters of worldwide tax uniformity because of the political nature of the compromises involved. A more flexible approach to international tax problems may be possible in the context of an international tax institution structured like the GATT. The minimum requirements for such an institution are a power to determine disputes among members and to act independently as a catalyst for promoting changes to international tax rules. The advantage of this approach is the flexibility that it offers. At the beginning it would only be necessary to have some minimal generally binding rules such as an obligation to relieve double taxation and the conferring of most favoured nation status on signatories. Nations could then adopt from a menu of options a greater range of undertakings such as tax rate ceilings (without reciprocity) and non-discrimination in much the same way as tariff undertakings and side agreements operate in the GATT. It would be possible for rules to be more general than those in the OECD Model because of the interpretive role of the international institution. Within such a structure very different solutions could be adopted to the tax problems caused by transnational corporations such as an international tax base that would eliminate current income recharacterisation, transfer pricing, treaty shopping, thin capitalisation and controlled foreign corporations problems. The world does not need another model bilateral tax treaty and this approach is not recommended for the Asian-Pacific region. What is needed is another mode for the development of international tax relations. Yet the success of the bilateral tax treaty network means that nations will not move on a worldwide basis to a GATT style institutional alternative without some confidence that it will be an improvement. Hence such an initiative will need first to be undertaken on a regional basis. The Asian-Pacific region provides an ideal proving ground because it is not so preoccupied as Europe, Africa and the Americas with other issues such as trade blocs, the conversion of centrally planned to market economies and third world debt. Moreover, it is time that the region exerted an influence on world affairs as befits its economic status, and the need for another solution to international tax problems provides the opportunity to do so.